Article
8000 Tax Credit
Yes, $8000 That you DON'T have to pay back!
The following article from www.irs.gov briefly explains the home buyer tax credit. If you are a first time home buyer or have not owned your own home in the past 3 years this is an opportunity you will not want to pass up!
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It is official the Home Buyer Tax Credit has been extended! Not only has it been extended, but it has also has been re-written to include current home owners who have owned a home for 5 of the past 8 years ! If ever there was a time to buy a new home, its now! Here is a short summary of the changes (or in reality the "upgrades") for the tax credit that was signed November 6, 2009.
Summary of the "upgrades":
à The expiration date for the credit will now be April 30, 2010.
à First-time buyers who have not had interest in a principal residence for three years are still eligible, and the maximum amount remains the same $8,000 for married couples, $4,000 for those filing separately. (That's still less than 6 months away!)
à Current homeowners, who have consecutively maintained the home they want to sell as their primary residence for five of the last eight years, are also eligible. However, the maximum amount for those homeowners is lower: $6,500 for married couples and $3,200 for those filing separately. (This is the best upgrade of them all! Now a much larger population will be able to take advantage of this amazing opportunity. Who couldn’t use an extra $6,500)
à The tax credit may not used to purchase a home for more than $800,000. All buyers who want to get the credit must include documentation of the purchase on their tax returns.
à The income limits for both tax credits have been raised to $125,000 for single buyers and $225,000 for married couples.
The National Association of Realtors has posted a very thorough and informative article on the Home Buyer Tax Credit. To read about it Click Here!
Click Here To View a Video On The New Tax Credit!
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NEW YORK (CNNMoney.com) -- Home prices are cheap. Affordability is at a record high. And the market is littered with distressed properties looking for a buyer.
But there is one big obstacle for many first-time house hunters looking to take advantage of the market: cash for down payments. The typical first-time buyer has only saved enough to cover 4% of the purchase price, according to the National Association of Realtors.
As part of the stimulus package, Congress created a refundable first-time homebuyers tax credit in hopes of helping on-the-fence buyers to take the home-purchase plunge. But buyers couldn't collect the $8,000 credit until tax time, rather than at closing time - when it's needed.
Now the U.S. Department of Housing and Urban Development is planning to change that. The agency is working on a plan that will allow Federal Housing Authority-approved lenders to provide buyers with the tax credit cash up front.
"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment," said Shaun Donovan, HUD secretary, in a speech last Tuesday before the National Association of Realtors.
States first
Donovan did not reveal many details, but the plan could be modeled after programs in Colorado, Missouri, New Jersey, Pennsylvania, Tennessee and Washington. To quickly infuse cash into their housing markets, these states created "bridge loans" that allow buyers to borrow against the $8,000 credit and then repay it with their tax refunds.
The first state to launch such a plan was Missouri, which rolled out its Missouri Housing Development Commission Tax Credit Advance Loan program on January 14 - a month before Congress approved the stimulus package. Since then, Missouri has approved applications by more than 300 borrowers and closed on 128 of them.
Lamar Cherry and his wife, Chrishanna, used the program to augment their down payment when they bought their home in Kansas City.
The couple purchased a four-bedroom, three-bath split-level home for $150,000, putting about 6% down. Much of that $9,000 came from the loan program, which they tapped so they wouldn't have to drain their reserves.
"We had money saved up that we were going to use for the down payment," said Cherry. "Now we can use some of that to buy some things we need for the house."
At closing, the Cherrys, like all buyers in the program, signed for their first mortgage, plus a second mortgage issued by the state. The second note is good for 6% of the price of the home, up to $6,750; there is a $350 set-up fee, but no interest is charged if the debt is repaid by June 2010.
In Missouri, borrowers can only access $6,750 of the $8,000 credit for down payments. "We wanted them to have a cushion below that $8,000 in case other tax liabilities show up," said Greg Spurgeon, the single-family homeownership administrator for the Missouri Housing Development Commission.
If borrowers don't pay off the note, it becomes a 10-year fixed-rate mortgage with an interest rate one-half percentage point above that of their first mortgages. For example, borrowers paying 6% on their first mortgages would be charged 6.5% on the second.
So far, Spurgeon said, a significant proportion of participating homebuyers have repaid their loans. He expects most of the others to do the same before the deadline.
Cherry has claimed the federal tax credit on his 2008 taxes, but he hasn't gotten his refund yet. He definitely intends to repay the loan before the 2010 deadline because, he said, not doing so would add about $75 a month to his house payments.
FIRST-TIME HOMEBUYER TAX CREDIT ALERT From www.irs.gov
The American Recovery and Reinvestment Act (ARRA) included a new $8,000 first-time homebuyer tax credit for 2009 home purchases. Taxpayers who have recently purchased a home or are considering buying a home, have several different ways that they can receive this tax credit - even if they have already filed their tax return.
Qualifying taxpayers who purchase a home between Jan. 1, 2009 and Dec. 1, 2009 can claim up to $8,000 or $4,000 for married individuals filing separately. Taxpayers can claim the credit either on your 2008 tax returns or 2009 tax returns next year. The credit begins to phase out at a modified adjusted gross income of more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10% of the purchase price up to maximum credit.
The filing options, according to the Internal Revenue Service (IRS), are listed below:
- File an extension. Taxpayers who haven't yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
- File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.
- Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
- Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.
In addition to the first-time homebuyer tax credit included in the ARRA, taxpayers who purchased a house between 04/08/08 and 12/31/08 qualify for a $7,500/3,750 tax credit that will need to be repaid over 15 years.
For more information, visit: http://www.irs.gov/newsroom/article/0,,id=187935,00.html
For more information on the $8,000 First-Time Homebuyer Tax Credit included in the ARRA, visit: http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet=7.
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